Q: My customer would like to establish a benefit account for a fundraiser they are doing in their community. What type of account should this be and what documentation is needed?
A: Generally, benefit or memorial accounts are accounts that will be used in connection with raising money for people who need financial assistance due to an accident, illness, or other tragedy. There are several ways that these types of accounts could be set up at the financial institution:
- A simple trust can be drafted, and the account opened in the name of the trust (e.g.—irrevocable trust agreement).
- Organization assisting in the fundraiser or memorial could open the account under their name for collected and deposited funds (e.g.—treat like opening an organization account)
- Account could be opened in name of person(s) benefiting from the fundraiser (e.g.—treat account like individual/single-party or joint/multiple-part account but the beneficiary must be authorized to transact on the account).
The above methods are generally the only practical methods used when determining how to establish these types of accounts. Some banks may allow customers to open these accounts as informal trusts, like “FBO” or “ITF” accounts. But this brings in a couple of other considerations for the bank, especially when it comes to ownership of the account, and CIP purposes.
And as always, the bank is within their rights to recommend the customer consult with an attorney or a tax professional.
C/A has an excellent cheat sheet for Benefit/Memorial Accounts that further breaks down these considerations here: https://compliancealliance.com/find-a-tool/tool/benefit-memorial-fund-accounts-cheat-sheets
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